ICE Pursues Keeping Post-Brexit Oil Trading in London

(Bloomberg) -- Intercontinental Exchange Inc. is betting it can keep its futures and options markets -- home to half of the world’s crude oil trading -- in London in the event of a no-deal Brexit, a strategy at odds with the plans of almost every other major U.K.-based trading venue.

The owner of ICE Futures Europe is seeking so-called recognition from national regulators in “a handful” of the European Union’s most important member states, according to a person familiar with the matter. The approvals, if granted, would allow firms from those states to continue trading contracts based on the Brent crude oil benchmark in London, even if the U.K. crashes out of the EU without a deal next March.

ICE Futures Europe is taking a different approach to Brexit than its U.K.-based rivals. The dominant trading venues for equities, bonds, off-exchange derivatives and exchange-traded funds have all set up legal entities in another EU country. If there is a no-deal Brexit, their EU clients will still be able to access the venue based inside the trading bloc.

The London Metal Exchange is the only other major U.K.-based financial market that is seeking a license from each EU nation where it has member firms.

Unlike most U.K.-based market operators, ICE already has a regulated trading venue on the continent -- for natural gas and power contracts. ICE also has a clearinghouse in the Netherlands, thanks to its purchase of a majority stake in Holland Clearing House four years ago.

ICE has no immediate plans to shift energy and carbon trading to its Dutch unit, which is called ICE Endex, said the person, who asked not to be identified discussing private talks with regulators. The Amsterdam-based venue is a regulated futures market, so ICE could use it to trade energy and carbon derivatives without obtaining further regulatory approvals.

ICE Futures Europe generates only a small proportion of its revenue from continental Europe, said the person familiar with the matter. A spokeswoman for ICE declined to comment.

Some of Europe’s biggest trading venues have warned that Brexit could “split liquidity pools” by preventing investors on one side of the English Channel from trading with counterparties on the other side. ICE’s larger rival, CME Group Inc. is moving its European market for short-term financing, the largest in the region, out of London to eliminate this risk.

To contact the reporters on this story: Mathew Carr in London at m.carr@bloomberg.net;Will Hadfield in London at whadfield@bloomberg.net

To contact the editors responsible for this story: Reed Landberg at landberg@bloomberg.net, Keith Campbell, Vernon Wessels

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